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First, let’s understand each of the variables in this calculator.
Average Daily Rate ($): This is the rental price you charge per night for your Airbnb property. Should exclude taxes like sales tax, VAT, or GST. Why? Because taxes are not revenue; you simply remit this to the government.
Occupancy Rate (%): The percentage of nights your Airbnb property is booked in a year. For example, 70% occupancy means your Airbnb property is booked for almost 255 nights out of 365.
Operating Expenses (Yearly) ($): All costs of running the Airbnb for a year. This includes cleaning, utilities, Airbnb host fees, property taxes, maintenance, etc. Note, operating expenses shouldn’t include non-operating costs like interest, depreciation, income tax, etc.
Now, the question is: what about sales tax/VAT/GST paid to the vendors of operating services? Should these be part of the operating expenses? Well, it depends. If the taxes paid to the vendors are refundable or available as input tax credit, these taxes aren’t really expenses. If not, they should be counted as expenses.
Property Value ($): The current market value of the property.
Net Yield: This is a real estate metric that tells you the percentage return you’re earning on your Airbnb property value after deducting all running or operating costs. It’s actually the true profitability of the Airbnb property relative to its value.
Net operating income = Gross rental income - operating expenses
Net operating income = (average daily rate x occupancy rate x 365) - operating expenses
Net operating income = (100 x (70 / 100) x 365) - 8000 = 17550
Net yield = (Net operating income / property value) x 100
Net yield = (17550 / 200000) x 100 = 8.77%